Why Should Women Invest in ULIPs?

What are ULIPs?

ULIPs are life insurance plans which combine life insurance with investment subject to market risk that help you earn market-linked returns on your premiums. The premiums paid towards the policy are directed to specific funds that you choose. The funds, on the other hand, invest in market-linked securities like equity, debt, etc.

Depending on how the securities perform, the fund value rises or falls. In the case of premature demise during the policy term, the ULIP offers a death benefit to your family. If the plan matures, the available fund value is paid.

ULIPs have many benefits which make them suitable for women investors. Let’s understand what they are.

 

Can Women Invest in ULIPs?

When it comes to buying ULIPs, there are no restrictions based on gender. Women can also buy a ULIP based on their coverage needs and financial goals. They can buy a ULIP and enjoy the dual benefits of life insurance coverage and market-linked investment returns.

 

Benefits of ULIPs for women

Here are some reasons that make ULIP investments for women a good fit –

 

1. Insurance protection

ULIPs are life insurance plans. As such, besides allowing you to create savings for your goals, ULIPs also offer life insurance protection. Women can be financially secure against the risk of premature demise, especially if they are the primary breadwinners of their families. In the case of their demise during the policy term, the ULIP will pay a death benefit that can help their families tackle the financial loss suffered.

 

2. Suitable for different investment strategies

ULIPs offer a range of fund options for investing your premium. If you have a high-risk appetite, you can invest in equity funds and gain from their return potential. On the other hand, if your risk appetite is low, you can choose debt funds for stable returns.

With the variety of fund choices, ULIPs prove suitable for all types of women investors with varying risk appetites. Moreover, some ULIPs also offer readymade investment strategies that allocate your premium in a predetermined manner. Women who are new to investments or who need assistance in managing their portfolios can use these strategies for hassle-free investments.

 

3. Planning for financial goals

ULIPs come in different varieties. Child ULIPs are available to help you plan for your child’s secured financial future. On the other hand, if you want to plan for your retirement, you can choose pension plans There are endowment ULIPs, too, that help you save for different financial goals.

Thus, ULIPs prove to be a suitable option for creating a corpus for your goals.

 

4. Greater control over investment allocation

ULIPs allow you to manage your investment as per your needs. You can choose –

• The premium that you pay
• The fund into which the premium will be allocated
• The term for which you want the plan
• Optional riders, etc.

These choices give you complete financial freedom to invest on your own terms.

 

5. Flexibility

ULIPs offer flexibility, too. Here’s how –

• If you need liquidity during the policy tenure, you can make partial withdrawals post the lock in period, subject to policy terms and conditions and get immediate financial assistance in times of emergencies.
• If your investment strategy changes and you want to change the funds, you can switch, that too without incurring any tax liability2
• If you want to invest more, many ULIPs allow the top-up facility
• If you want to change the funds for future premium allocations, you can choose the premium redirection facility. It should be opted before the due date of the next premium and it might be subject to addition of Miscellaneous charges .
• You can also choose to avail the maturity benefit or death proceeds in instalments through the Settlement Option feature subject to policy terms and conditions.

 

6. Tax benefits

Let’s not forget the attractive tax benefits that ULIPs offer that allow women to plan their taxes better. Here’s how you can save tax with ULIPs

Premiums paid towards the plan qualify as a deduction under Section 80C (in case of old tax regime) up to ₹1.5 lakhs1. The premium should be up to 10% of the sum assured (for policies issued on or after 1st April 2012) or up to 20% of the sum assured (for policies issued on or before 31st March 2012) to enjoy the deduction1. If you suffer from any disability or disease as specified under Section 80DDB or Section 80U (in case of old tax regime), the premium should be up to 15% of the sum assured (for policies issued on or after 1st April 2013) to qualify for deduction1.

The death benefit received from the policy is tax-free3

The maturity benefit received is also tax-free under Section 10(10D). However, you should remember the following rules –

• If the policy has been issued before 1st February 2021, the maturity benefit is tax-free under Section 10(10D)4 subject to satisfaction of conditions mentioned therein
• If the policy has been issued on or after 1st February 2021, the maturity benefit is tax-free only for premiums aggregating upto ₹2.5 lakhs4 subject to satisfaction of conditions mentioned therein. If the premiums are higher, the returns would be taxed. The tax implication will be as follows –

Gains from units of high value ULIPs (whether equity/ debt oriented), would be taxed as Capital Gains at the rate of 12.5%. Policyholders shall be eligible for an exemption of its capital gains from high value ULIPs upto an amount of Rs 1.25 lakh as per Section 112A of the Act, subject to the satisfaction of conditions therein.

 

7. Retirement benefits

Women can buy ULPPs to plan for their retirement. They can choose Unit Linked Pension Plans that help them create a retirement corpus over their working life. A ULPP helps in accumulating a retirement corpus but can also help in securing payouts. At maturity, a portion can be withdrawn as a lump sum, with the remaining balance used to purchase an annuity. This can ensure a source of steady income after retirement.

 

Effective financial planning with ULIPs

ULIPs can serve as an attractive financial planning tool for women. You can enjoy financial security, market-linked investment returns, flexibility of managing your investments, and tax benefits with ULIPs. Assess the different types of ULIPs available and choose a plan that aligns with your financial goals. Buy the plan and take a positive step in your financial journey.

 

Key takeaways

• ULIPs are life insurance plans that offer the dual benefits of life insurance coverage and investment in market-linked funds.
• Women can buy ULIPs for life insurance protection and to create a corpus for their financial goals.
• ULIPs can offer different benefits like aligning with different investment strategies, flexibility, and control over investment allocation, among others.
• You can also enjoy tax savings on the premiums paid under Section 80C if you choose the old tax regime. The ULIP benefits can also enjoy tax exemption subject to stipulations of the Income Tax Act, 1961..
• Women can also choose retirement-oriented ULIPs and create a corpus for their golden years.

 

Conclusion

Women, whether they are working or managing their homes, can choose to buy ULIPs for the financial security that these plans offer, along with the potential of market-linked returns. With the added flexibility of switching, partial withdrawals, top-ups, etc., ULIPs also offer complete control over your invested premiums so that you can manage them as per your changing investment strategies. So, understand what ULIPs are and their benefits and then choose suitable plans that match your financial needs.

 

FAQs

 

1. Do women enjoy preferential benefits under ULIPs?

ULIPs offer similar benefits for women and men. However, the mortality charges for women might be lower since women enjoy a lower mortality rate5. This can result in reduced charges and a better return potential.

 

2. Can women claim higher tax benefits than men with ULIPs?

The tax slabs and deductions are the same for women and men.

 

3. Can women buy ULIPs in India?

Yes, women can buy ULIPs in India.

 

4. Are there any special ULIP plans designed for women?

Some insurance companies might offer ULIPs specially designed for women. However, such plans are limited. Women can explore the range of ULIPs available in the market and choose a plan that matches their financial needs.

 

5. Can working women and homemakers both invest in ULIPs?

Yes, working women and homemakers can buy a ULIP for their financial needs.

 

6. Can women invest in ULIPs online?

Yes, women can invest in a ULIP plan online by filling up the online proposal form and completing the online application process.